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Posted on February 21st 2006 in Legal Articles

Dismissing an Employee on Sick Leave

Dismissing an Employee on Sick Leave

The general rule is that employers are entitled to terminate an employee as long as they have just cause for doing so or they have given the employee reasonable notice of the termination or payment in lieu of notice. But what happens in the case of an employee who is away on sick leave? Although the general rule still applies there are several pitfalls to be aware of.

Just Cause
The first and most important thing to remember in these situations is that neither illness nor disability amounts to just cause for termination. Just cause is generally reserved for instances of dishonesty, theft, gross insubordination or conflict of interest.

Although the employer may not have just cause to terminate the employment relationship, an employee’s illness or disability may nevertheless lead to what is called frustration of the employment contract. Frustration is a legal term that describes an event which was unforeseen at the time the parties entered into their agreement and which is uncontrollable. This event makes it impossible for one of the parties to fulfil his/her duties under the contract.

In the employment scenario, if the employee’s long term or permanent illness prevents him or her from returning to work in a timely fashion the employment contract may be frustrated. When the employment contract is frustrated, the employer is not required to give reasonable notice of the termination.

Human Rights
Another potential problem area is the human rights issue. If an employee is capable of performing the essential duties of his or her job then the employee is entitled to equal treatment under the Ontario Human Rights Code. Further, employers have a duty to accommodate a person with a disability if doing so does not create an undue hardship for the employer.

When dealing with an employee who is on sick leave, it is important that the employer refrain from giving the employee an ultimatum about returning to work. Telling an employee that he or she must return to work by a particular date could have unpleasant consequences for the employer. Not only might a court determine that the employee was wrongfully dismissed, but the damage award may be increased to reflect this treatment of the employee. The following are two cases which illustrate this point.

Zorn-Smith v. Bank of Montreal
After 21 years with the bank, the employee was promoted to Financial Services Manager. However, the workload involved, combined with her family obligations eventually led to the employee burning out. When she was able to return to the bank, she asked to be given a teller position. Although the bank was agreeable, it requested that she remain in the management position until she could be replaced. When she had still not been replaced after a year, the employee sustained a second burnout. Three months later the bank felt the employee should return to work. Based on her doctor’s advice, the employee refused. The bank terminated her employment.

The trial judge concluded that the employee had been wrongfully dismissed and that the bank had abdicated its responsibility for the employee’s condition. In addition to the 16 months notice that the employee was entitled to, the bank was ordered to pay the employee three months of disability benefits and $15,000 in aggravated damages. The aggravated damages were to compensate the employee for the bank’s callous actions toward her.

Miller v. Fetterly & Associates Inc.
The employee had worked for the employer for 27 years. The employee suffered a nervous breakdown and was diagnosed with clinical depression. The employer advised the employee that if he did not return to work by a specified date his employment would be considered terminated. Based on his doctor’s advice, the employee refused to return on that date.

The court concluded that the employee was entitled to 17 months salary in lieu of notice. The court found that the amount of time off required was not in itself sufficient to justify a conclusion that the contract of employment was frustrated or that the employee had renounced it.

Reasonable Notice
If, as in the above cases, an employer has neither just cause nor a frustrated contract, then the employee is entitled to reasonable notice. To determine the amount of notice that is reasonable, including when dealing with employees on sick leave, consideration must be given to a variety of factors such as the length of employment, the position of the employee, the reason for the dismissal, the employee’s compensation, and whether the employer acted in good faith and fairly.

Terminating an employee can be tricky, if the employee is on disability or sick leave the situation can be even more problematic. In these situations it is wise to seek legal advice. Both Craig Colraine and Howard Steinberg work in this area. If you require additional information please contact them.